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More austerity may be ahead

Greek authorities will honor their commitments as laid out in the latest loan deal with international creditors, even if this results in the need for additional austerity measures next year, a top government official indicated Wednesday.

In an unusual show of honesty and realism, the same official suggested that there might not be a “clean exit” for Greece after its third bailout expires next summer but something more restrictive.

There are a range of possible scenarios between that of a clean exit, which Prime Minister Alexis Tsipras has heralded, and the prospect of a credit line for Greece, the official said.

On the prospect of more austerity next year, the official said he believed that there would not be a big divergence in fiscal targets next year.

“If there is, we’ll see what happens, but were are committed to a target of 3.5 percent of gross domestic product,” the official said, referring to the primary surplus goal set by creditors.

The official also noted that, once a primary surplus target is reached, residual revenue will go toward boosting the Social Solidarity Income program for 2017 for Greeks who have been hardest hit by austerity but also toward paying off state debts to the private sector and to growth programs.

Decisions on these matters are expected to be taken following talks with the mission chiefs representing Greece’s foreign lenders, who are expected to travel to Athens next month and to assess the progress of authorities in boosting tax collection and curbing spending.

Although Greek officials have underlined the importance of completing the next bailout review by the end of the year, sources suggest that the process might drag into January.

The most important thing, the official noted, is “that we are not part of the problem” when important discussions about the future of the Greek program get under way in the first quarter of next year, touching on the participation (or not) of the International Monetary Fund in Greece’s third bailout and relief for the country’s debt burden.

Greek authorities are concerned about the IMF’s stance opposite Athens.

Apart from the Fund’s traditionally tough position on fiscal matters, there are concerns too about its demands for a further recapitalization of Greek banks.

The official, however, assumed the stance of the European Central Bank on this issue, noting that there is no need for Greek banks to receive further capital.

The official said that Greece planned to tap international bond markets in the next 6-9 months following a successful return in July.